Next up in our ReveNew Years explainer series is this quick take on three especially dangerous mistakes companies often make with their early models.
Summary: Financial modeling is tricky for early stage companies. The assumptions underpinning these models are by definition speculative, created from a mix of research, prior experience, best practice and (hopefully!) a little data gathered through early contact with customers. No surprise that mistakes are easy to make, sometimes unavoidable.
But there are three mistakes that stand out to me as especially common...and especially dangerous to a young company’s survivability:
-Poorly calculated unit economics
-Models that assume customer acquisition costs will decrease faster than they actually do, and
-Plans that assume large, favorable shifts in a company’s margins long before they actually materialize
In this next installment of my ReveNew Year Explainer Series I quickly run through these three common mistakes in hopes that you and your company can avoid them!
About Melissa Withers
RevUp Capital Managing Partner Melissa Withers is an experienced fund manager and business builder with 120 + investments under management. Melissa co-founded RevUp in 2016 after working as an early stage equity investor, driven by the opportunity to transcend the “exit or bust'' constraints of equity-only investing. Today, RevUp has investments across the U.S. into a spectrum of B2B and B2C companies. Melissa began her career working at the intersection of science, education, and public policy at the Whitehead Institute for Biomedical Research at MIT. She was also co-founder of the Business Innovation Factory, an organization dedicated to the design and testing of new business models in areas of high social significance. In addition to her role at RevUp Capital, Melissa is entrepreneur-in-residence at Tech Stars Boston and a strong advocate for expanding investment in women, people of color and those living outside top-tier markets. Melissa also runs Operation Athena, a program that offers investment and support to women-led companies and those founded by people of color. If not for her family, love of gin drinks, and preference for indoor plumbing, she'd likely spend her days hiking.
More About RevUp Capital
RevUp Capital invests in B2B and B2C companies that are revenue-driven and ready to double down on growth. We deploy cash and capacity to help companies grow from $1-3M to $10-30M, quickly and efficiently, using a non-equity, revenue-based model. Since 2016, we have used our battle-tested cash and capacity model to move companies up the growth curve, and together, break free from the constraints of equity-only funding.
Companies enter our portfolio with $500K-$3M in revenue, a strong growth rate, and a team that’s ready to scale.
Our typical investment range is $300K-$500K. We invest into a company's market-facing activity using a cash and capacity model. We pair our cash investment with 12-months of dedicated support from the RevUp Growth Platform: a powerful resource to build a data-driven growth engine, delivered by people who get the work done. Rather than take equity, companies return investment through a small percentage of revenue over time.